Entrepreneurs from the micro, small and medium business sector have considerable doubts over plans to sign a TTIP – a Transatlantic Trade and Investment Partnership agreement. On the one hand, commonly cited TTIP regulations provide a hope that Polish entrepreneurs will obtain greater possibilities of investing and selling their goods on the American market, but on the other hand those regulations give rise to concerns over the domestic market being taken over by entities from the United States. Since such an agreement will undoubtedly have a considerable impact on the situation of economic entities in Poland, we will attempt to arrive at solutions in a series of commentaries.
We draw attention to the fact that the solutions we describe are based on generally available information which is not official, and it could therefore be the case that the final shape of the TTIP will be different – especially because recently increasingly far-reaching reservations are being voiced on both sides of the Atlantic, both regarding particular treaty proposals and the idea of a TTIP in itself.
As an introduction, we should stress that the TTIP has a complex character covering many economic areas, including the micro, small and medium business market. The main facility anticipated for such entities is to be the liquidation of non-tariff and regulatory barriers which include quantitative restrictions, the need to obtain certificates or licences, complicated customs procedures and inspections, and formalities regarding security procedures. Also, in some sectors reducing or lifting customs barriers could be possible, although this will not take place immediately after the agreement comes into effect, or at least not to the extent to which this could cause problems for EU businesses.
Despite the relatively low customs rates in trading between the USA and the EU, there are still many categories of goods encumbered with high duties in mutual trading. These include raw tobacco, clothes, textiles, leather goods, footwear and electronic products. Additionally, customs rates sometimes differ, depending on whether the goods are exported to the USA from the EU or from the EU to the USA. This primarily concerns cars, as EU duty for importing cars from the USA is 10 per cent, while USA duty for importing cars from the EU is 2.5 per cent. The liberalisation of customs rates could therefore contribute to an increase in mutual trade exchange and facilitate foreign investments. This will undoubtedly also contribute towards an increase of American entrepreneurs in Europe, which could result in tougher competition and lower prices for some products.
Another important barrier in access to the American market for Polish entrepreneurs is the multitude of administrative requirements, and so a TTIP could make it easier to conduct economic activity in the USA. However, the number of small and medium Polish entrepreneurs exporting their goods to the United States is relatively small compared with the total number of businesses operating in Poland. According to a report by the European Commission in 2012, the number was about 3,600, while the total number of micro, small and medium businesses in Poland in 2012 was almost 1,800,000 (Central Statistical Office data). This result did indeed place Poland eighth in the EU in terms of the number of businesses exporting goods to the USA, but the export value was not as significant, amounting to only EUR 0.6 billion (by way of comparison, the value of goods exported solely by Ireland in the same period was EUR 7.3 billion). For the aforementioned reasons, there is a risk that if the agreement comes into effect this will mainly benefit big entities from other EU countries and those which can already afford to export goods to the USA. On the other hand, removing customs, non-tariff and regulatory barriers could encourage domestic businesses to enter the American market or increase the present amount of trade with that country.
With the TTIP, micro, small and medium entrepreneurs can also get access to the American public procurements market, which is currently subject to restrictions for entities from abroad. Preferences for American businesses on procurements in the military, construction and rail sector are almost a rule, and an obligation has been imposed on federal institutions to buy products exclusively in American companies. Some American states do not allow foreign businesses to have access to public procurements at all. The EU’s intention is to negotiate so that in the public procurements procedure EU investors in the USA are treated the same way as American entrepreneurs.
A certain facility for micro, small and medium entrepreneurs could also be the solutions anticipated in the draft TTIP, which are aimed at ensuring appropriate access to information on the subject of the provisions of the agreement. To that end, a website is to be set up (an online information and advisory service) which will provide access to information concerning imports, exports and investments in the USA, including customs dues, taxes, customs regulations and procedures, and market possibilities.
The protection of investments, both in the United States and the European Union, is to be guaranteed by the possibility of referring disputes for arbitration, which arise between an investor and the state in which the investment was made (Investment Court Systems – ICS). This mechanism causes a certain amount of controversy, as it seems to favour big entities above all. It will definitely improve investors’ security, but it could make it difficult for particular governments to conduct a specific economic policy. However, the subject of the impact of global corporations on the governments of particular countries extends beyond this article.
To summarise, the benefits from a possible entry into force of the TTIP for the smallest market players seem to be mainly theoretical, and the dangers arising from increased competition from companies from the USA on the EU market appear to be more clear-cut. The prevalent opinion is that the TTIP is to serve primarily the biggest corporations on both sides of the Atlantic, including in their struggle against the expanding economy of the People’s Republic of China.
Unfortunately, the precise text of the TTIP, and therefore the detailed solutions for the future, are not as yet known. Since the agreement is still being negotiated, the final shape of the contractual provisions will only be known after that process has ended, which is planned for this year, according to media reports. However, ending the negotiations will not mean that the TTIP will automatically come into effect, because it will still need to be ratified by US Congress and the parliaments of all 28 member states of the European Union. It should be pointed out that, without the consent of all EU countries, the agreement will not enter into force at all.